Maritime shipping is the backbone of the international economy, accounting for more than 90% of world trade. This critical economic weight has recently been illustrated by the Suez Canal blockade of March 2021, which caused major supply chain disruptions on a global scale.
This role in the economy is as significant as its environmental impact: maritime shipping is responsible for 2.5% to 3% of global greenhouse gas emissions. This is comparable to the contribution of Germany, is alarming both in its current level as well as in its forecasted growth. According to the International Maritime Organization (IMO), at current rates, the sector’s emissions could rise to 90-130% in 2050 compared to 2005.
In addition to contributing to global warming, one of the main issues associated with maritime shipping is its contribution to local air pollution in port cities. Conventional heavy fuel used by a large majority of the global shipping fleet emits numerous harmful particles (sulphur dioxide, nitrogen dioxide, fine particles, etc.). Despite the strengthening of regulations regarding these local emissions at local and international levels, scientific literature estimates the number of premature deaths in 2020 linked to pollution from the shipping industry between 212,300 and 595,400.
Notwithstanding multiple efforts in the past decade by industry and regulatory bodies, the shipping industry’s environmental impact remains a major challenge. Despite the global pandemic of 2020, shipping demand has remained high on a global level and is set to keep growing at a slow but steady rate of 2-3% annually in the coming years. Moreover, logistical congestion in the industry leads carriers to require significant increases in their fleets’ size and tonnage. Thus, the question poses itself, is the maritime shipping industry on the right course towards decarbonization, and are current efforts and initiatives in line with the Paris Agreement?
First and foremost, the shipping industry and its global governing body, the IMO, have taken steps to tackle the environmental challenges linked to its flourishing activities. The sector has made significant efforts to reduce its environmental footprint, notably by overcoming the sector’s inherent decentralized nature through global initiatives, heavily limiting the effects of local efforts or legislation. Since 1997, the IMO has been mandated by its members to control the sector’s greenhouse gas emissions, resulting in a number of resolutions on emissions, energy efficiency and data collection efforts. In 2018, the organization adopted its “Initial strategy on the reduction of greenhouse gas emissions from ships,” aiming for a reduction of emissions of 40% by 2030 compared to 2008. This strategy is set to be revised by 2023, setting new standards aiming for a complete decarbonization of shipping as soon as possible in the 21st century. Local pollutants are not exempt from the IMO’s efforts: in January 2020, a global “sulphur cap” came into force, limiting the sulphur content of fuels used by the shipping industry to 0.5%.
This global take on emissions has long been complemented by local policies. The EU has been a leader in this respect, setting a 0.1% sulphur emission control area in all ports and in multiple other areas of the territorial waters of its Member States. Emissions reporting requirements are also enforced, as well as incentives for ports to deploy the infrastructure necessary to welcome the waste waters of ships equipped with exhaust gas cleaning systems. Finally, market players have deployed numerous voluntary initiatives aimed at further reducing the emissions of their fleets. Such initiatives include the development of liquified natural gas, biofuels, ammonia and hydrogen as shipping fuels, improved energy efficiency of ships, carbon offsetting and wind sails.
While the initiatives and regulations mentioned above are relevant contribution in limiting the shipping industry’s emissions, these remain largely insufficient – if not counterproductive in some cases – to set this thriving economic sector in line with the objectives of the Paris Agreement. Indeed, some solutions embraced by the industry as silver bullets for their environmental impact could end up worsening an already dire situation. For instance, one of the main solutions considered to reduce the carbon emissions of ships is the uptake of LNG to replace heavy oil. But as natural gas is associated with significantly lower carbon emissions than oil, it remains a carbon intensive fossil fuel. Moreover, gas extraction is currently accompanied by significant methane leaks, which has a worse contribution to climate change than CO2.
Hydrogen and one of its by-products, ammonia, also fall into the category of promising solutions needing to be carefully managed to improve the sector’s environmental impact. Both kinds of molecules can power ships by combustion or by producing electricity through a fuel cell, effectively replacing hydrocarbons. However, the production of these molecules is either associated with a very low roundtrip efficiency when produced from renewable electricity, or a heavy environmental footprint when produced from natural gas.
Beyond the current lack of swift and effective solutions to decarbonize the shipping sector, the investment cycles inherent to the industry are also a major barrier to the generalization of the most effective solution available. Currently, despite efficiency gains being considered in the latest designs, ships fuelled by heavy oil remain the norm in shipyards around the world. This becomes a pressing issue when considering that a ship’s average lifespan is 25 years, and multiple supplementary years can go by between the designing and building processes of ships. Even if a paradigm-changing solution was found to decarbonize the sector’s emissions, a full investment cycle would need to go by before it could fulfil its potential.
Presently, the shipping sector is at a major crossroads. The aggregation of mature decarbonization solutions (energy efficiency, reinforced legislation against the heaviest polluting fuels, etc) and extensive research and development into more prospective alternatives (ammonia, green hydrogen, etc) could theoretically put this key link in our globalized world in line with the Paris Agreement and, on the longer term, lead the way towards complete decarbonization. However, this would require a significant throttling up of investments in clean solutions from market players. A recent study by the University Maritime Advisory Services and Energy Transitions Commission estimated the scale of investments needed for the complete decarbonization of shipping at close to $2 trillion over 20 years, a figure exceeding the $1.8 trillion global energy investments in 2018. Should the sector fail to deploy such efforts, emissions at current rates could see a 50% increase by 2050 compared to 2018.
The challenge the shipping industry faces is great, but solving it remains within reach. Growing policy initiatives of local and global scales imposing stronger sanctions and restrictions vis-à-vis the most polluting technologies will ultimately make significant investments from shipowners in energy efficiency and decarbonized fuels a necessity. Such policy options include carbon pricing schemes, supporting the deployment of electric grid connections at quays to avoid emissions when ships are in port-by-port authorities, and gradually banning certain fuels from using port infrastructure. Limiting the financial opportunity to invest in polluting maritime transport solutions through investment taxonomies could also prove to be a significant incentive to shipowners to decarbonize their fleets. Private initiatives such as the Poseidon Principles could be of similar efficiency if reinforced to be in line with the Paris Agreement.
University of Paris Saclay, Momentom programme
*Aimé Boscq is an EPG Fellow. The views expressed in this paper are those of the author and do not necessarily reflect the opinions of EPG.